Markets & Finance

Deutsche Boerse Higher on Buyback News

March 22, 2005

Germany

Deutsche Boerse was up €0.91 to €59.06 after the company said it will buy back as much as 1.1 billion of its stock. Meanwhile, Standard & Poor's reduced its long-term credit rating on Deutsche Boerse from AA+ following the announcement of its share buyback program, noting the outlook is stable. This affects the related Clearstream Banking unit. S&P says that the short-term ratings on both are affirmed.

Volkswagen was up €0.78 to €36.53, after UBS raised its target to €29 from €27, with a reduce rating. The broker said the company is striving to push through cost savings at its core operations, which are combating the strong headwinds from raw materials prices, the expiration of attractive currency hedges and price/volume pressure in core German, U.S., and Chinese markets.

Airline Lufthansa was down €0.10 to €11.07, after the company said it expects 2005 operating profit to be near 2004's €383 million, including costs associated with the Swiss takeover. Swiss deal will accrue one-off costs of €101 million. It will also generate expected annual synergies of €165 million from 2008. Synergies are expected to boost profits by around €86 million a year from 2008. The company says the combined entity's operating profit will rise by €1.2 billion by 2006. Less than 9 Swiss francs per share were offered by the company as group's board approved the takeover of Swiss, which is to be held in a newly-formed trust. Large Swiss shareholders approved the deal. The company will pay €310 million for Swiss. It sees paying 45 million to the 15% of free float investors, while it will pay major shareholders €265 million. Lufthansa will initially hold 11% stake in the Swiss trust, but thereafter Lufthansa will raise its stake in the Swiss trust to 49%, following approval, and will ultimately raise its stake to 100%.

Britain

Mining group Rio Tinto was down £0.37 to £17.51 after the company announced it has sold its holding in the Labrador Iron Ore Royalty Fund to RBC Capital Markets for $130 million. The company said the transaction is expected to be completed on March 29.

Venture capital firm 3i was up £0.05 to £6.87 after the company said that it is continuing to see strong performance across its business. It added that it is considering making a cash return to shareholders and expects to make an announcement at the fiscal year results on May 12. It said the investment to the end of February totalled £843 million, compared to 794 million to the end of February 2004. It added that realisation proceeds reached £1.15 billion.

Unilever was up £0.08 to £5.08, after Morgan Stanley recommended a switch out of Danone into the company or Nestle, where the broker sees better upside potential. The broker believes that that European food producers will perform in line with the broader European markets over the coming 12 to 18 months based on broker's belief that the universe is fully valued. It rates the stock overweight.

France

Energy company Total was down €2.70 to €178.90, after the U.S. Department of Energy disclosed that weekly inventory data showed a stronger-than-expected build in crude stocks of 4.1 million compared to the expectations of above 2 million barrels. Distillates showed a sharper than expected draw of 2.8 million, compared to forecasts of 1.3 million, and gasoline a gasoline a sharper-than-expected draw of 4.1 million compared to the 1.2 million predicted. Separately, the company. has started talks with Gazprom, the world's largest natural-gas company, on participating in a $10 billion project to develop Russia's Shtokman gas field in the Arctic and sell liquefied natural gas to the U.S., according to Bloomberg. Shtokman holds 3.2 trillion cubic meters of gas, enough to fuel all of North America for almost four years, adds the article.

Telecom supplier Alcatel was down €0.16 to €9.49, after ABN Amro initiated coverage with an add rating and a price target of €11. The broker said the company should surprise positively from the second half of 2005 through expansion from the access network into higher-margin end-to-end solutions.

Marine services company Groupe Bourbon was up €1.21 to €46.80, after Cheuvreux noted that fiscal year 2004 earnings before interest and taxes growth of 45% to €126 million is 7% ahead of expectations. The broker pointed out that the net profit is up 75% to €100 million thanks to €24 million in exceptional gains. The broker said earnings before interest and taxes is above expectations in retail thanks to a strong second half performance in France. In marine, lower than expected earnings before interest and taxes in offshore is more than compensated by bulk transportation, salvation and towing. It highlighted a good outlook and rated the company underperform, with a €35 target price.

Tire maker Michelin was up €0.95 to €51.15, after Credit Suisse First Boston lifted its target to €42 from €36, after the company's strong fiscal year 2004 performance in a difficult environment. The broker notes, however, that the company disappointed with its cautious outlook for the first half of 2005 to be less supportive than the exceptional first half of 2004. Despite this, the company is targeting a year-on-year improvement in earnings before interest and taxes for fiscal year 2005, which the broker believes is ambitious. The broker reiterates its underperform rating. From Standard & Poor's European MarketScope